What Concerns Me About This Market
On Tuesday, the Nasdaq opened firmer and initially traded higher but soon found
its high and then generally worked its way lower for the remainder of the day.
It did mange to stabilize in late trading but this wasn’t enough to keep it from
closing poorly. The top/bottom of its trading range could provide
resistance/support respectively.Â
The S&P put in a similar performance. This action keeps
it right at its prior breakout levels.
In the sectors, like the market itself, many have lost
momentum. In tech, the semis remain near the bottom of their wide-and-loose
trading range. Software remains in a longer-term trend but has sold off fairly
hard as of late. Telecom remains in an uptrend but is now bumping up against its
old highs. Internet, although also in a strong longer-term, continues to slide
from a minor double top. Biotech remains below multiple tops. Outside of tech,
the banks remain below multiple tops. Retail has been trading sideways-to-lower
as of late and is on the verge of breaking down out of this trading range. On a positive note, the
homebuilders remain especially strong and so far, have only been pulling back as
of late. Ditto
for broker/dealer–Note: it will be interesting to see how upcoming earning
announcements will affect this group.
So what do we do?  In addition to the poor
section action discussed above, I’m concerned about the indices lack of forward
progress. This doesn’t mean you should run for cover. One or two big up days
would make all the difference in the world. However, until that occurs, I
just think we should remain cautious. Therefore, continue to take a “show me” attitude
before initiating any new longs. And, honor your stops on existing
positions. On the short side, I’m not sure it’s time to be
hero and call a top just yet–wait for follow through here too.Â
No setups tonight. Remain patient. On a breakout we should
start seeing longs again. Or, if the market remains soft, we will likely see
transitional (early trend) setups.Â
Best of luck with your trading on Tuesday!Â
Dave Landry
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